Choosing The Right Insurance For Your New Home In Canada

What Is Home Insurance? 

Home insurance is an insurance product that offers financial protection against various risks that come with owning a home. It includes certain coverage to the actual building and your belongings inside the home. Home insurance policies can also offer some personal liability protection, in case someone is injured, or their property is damaged when visiting your home. 

To sum up, home insurance protects: 

• Your home. 
• Your belongings. 
• You and your family from legal risk if you injure someone else. 

Why Home Insurance Is Essential

Your home is more than four walls and a roof. It’s where your family feels safe and comfortable, and where your most treasured belongings are kept. But unexpected events, like fires or break-ins, can threaten this sense of security. Purchasing home insurance is an affordable way to provide financial protection in case of a loss. 

Is Home Insurance Mandatory In Canada?

Home insurance is required by most mortgage providers. So, if you have a mortgage on your home, you must buy and maintain a home insurance policy under the terms of your mortgage agreement. 

If you don’t have adequate home insurance, this could be a breach of your mortgage agreement and your mortgage provider may require full repayment of the mortgage. This means you will have to pay the entire balance owing, or you will risk foreclosure. While this may seem dramatic, home insurance protects your mortgage provider’s stake in your property which secures the mortgage loan they issued to you. So, it’s part of the price you pay to borrow money. 

If you don’t have a mortgage, you are not legally required to maintain insurance on your home, but it’s still a good idea. Replacement costs for your home and contents are high, so the cost of your policy will be good value if anything happens.

The Basics: Understanding Home Insurance Coverage

Home insurance may cover the costs of accidents and unexpected events that impact your home and/or your family, and even your pets. It is important that you understand your insurance coverage. There is insurance-specific language that might be unfamiliar to you, and the consequences of not understanding the policy can be problematic. 

In Insurance, an exclusion is an event (accident, incident, peril or accusation) that an insurance policy will not cover. Common exclusions include earthquake and flood damage, routine wear and tear, and home-based businesses.

Finally, if English or French aren’t your first language, consider seeking help from a translator or bilingual insurance advisor. It is that important for you to understand your home insurance policy. 

What Does Home Insurance Cover In Canada? 

Your coverage will vary depending on the level of policy you choose and the company that provides your home insurance policy. But here are some common things covered by home insurance in Canada: 

Basic Coverage

Basic coverage pays the costs of repair or rebuilding for covered damage. So, if your home were to catch fire and you lose some or all your contents and/or the building too, it will cover the cost to rebuild it and to replace your belongings, up to your policy limits. 

Your home insurance policy may also cover costs if you’re unable to live at home, such as the costs of a hotel or Airbnb.

Personal Liability

Personal liability coverage may offer protection in case you or one of your family members accidentally injures someone else or their property. This coverage usually offers either $1 million or $2 million in coverage, offering peace of mind in case of an accident. 

All-Risk Home Insurance Coverage

All-Risk coverage is more comprehensive than basic coverage. It can cover property beyond your home, like a freestanding garage or a shed. It may also provide protection against more risks. 

Special Items Coverage

Your home insurance policy will have certain limits on the value of items. Any belongings you have that cost more than these limits will need to be insured as a special item if you want to fully protect them. This coverage is an optional extra, so you don’t have to include it, but you may be underinsured if you don’t. Being underinsured increases your financial risk. 

The limit varies depending on a few factors, but here’s how it operates (in theory): If the limit for sports equipment is $1,000, and your skis cost $1,500, you will either need to insure the skis as a special item for $1,500 (which may increase the amount you pay for your insurance) or you will receive $1,000 for the skis if they are stolen from your home. 

Coverage During A Move

You may be able to get coverage that protects your belongings against damage as they move to your new home, depending on your insurer.

What Is The Best Home Insurance In Canada?

One of the trickiest things about home insurance is finding the right balance between cost and coverage. There isn’t a one-size-fits-all policy, nor is there one policy that’s better than every other policy. 

What we think matters when it comes to finding the best home insurance in Canada is the flexibility. The goal is to buy home insurance coverage that protects you from as many types of damage as possible for a price that you can afford.

How Much Is Home Insurance In Canada? 

Your home insurance policy cost will vary because it is tailored to your specific circumstances. However, many home insurance policies cost between $900 and $1,500 per year. The costs can be higher, depending on the factors that make up your risk profile. 

Factors That Impact Home Insurance Pricing

The cost of your insurance policy per year is called the ‘premium’. You pay a premium every year (or you pay part of that premium every month) to receive your insurance coverage. 

There are a wide range of factors that impact how much your annual premium is, including the following: 

Insurance Claims History 

Your insurance claims history plays a role in determining your home insurance premium. As a newcomer to Canada, you might see higher initial policy costs due to a limited claims history. On the other hand, if you previously held renter’s insurance in Canada and maintained a claim-free record, you could benefit from lower premiums. 

Where You Live

Where you live plays a big role in the overall cost of your home insurance. Your insurer takes the risk of you making a claim into account when determining how much you pay, so if you live in an area prone to wildfires or floods, you may pay a higher premium. 

What You Own

The more valuable your household items and belongings are, the higher your premium will be. This is because the cost to repair or replace your household goods is higher.

For example, if you own $40,000 worth of clothing, furniture, and other household items, your premium may be lower than if your belongings are worth $120,000. 

Bundling Insurance Policies

If you choose to bundle multiple insurance policies, for example auto and home insurance, you may be eligible for a discount on both policies.

Features Of Your Home

The type of home you live in will also impact your premiums, as well as the type of insurance you purchase. Townhomes and condominiums fall under condo insurance, rather than home insurance, for example. 

The features of your home will also impact how much you pay for insurance each year. Homes with a security system, tankless hot water system, and modern wiring will usually result in  a lower premium than homes with higher risk systems, such as poly-b plumbing, low or no security, and a water tank older than fifteen years. 

Your Deductible 

Your insurance policy will normally have a ‘deductible’, which is the amount you will pay in the event of an insurance claim. For example, if you choose a $1,000 deductible, and you make a $10,000 insurance claim, you pay the first $1,000 and your insurer pays the remaining $9,000. 

It’s common to base the deductible on how much you could afford to pay in case of an emergency. The reason for this is that choosing a higher deductible tends to lower the total cost of your insurance premium. 

Avoiding Insurance Mistakes

Finally, we want to outline some common insurance mistakes we see to help you avoid them: 

Deciding Based On Price

The price of the premium should not be the only thing you consider when buying home insurance. The lower the price, the lower the level of coverage you typically get from the policy. 

Instead, you should aim to get the most coverage possible at a price you can afford with your insurance policy. 

Deciding how much to pay for your insurance is an individual choice. However, you can use your overall housing costs as a rough guide. The Canadian Government) suggest spending 35%-40% or less of your total household income on housing costs. Your housing costs include:

• Mortgage
• Home equity line of credit payments 
• Property taxes
• Condo/strata fees
• Home insurance 

The federal government provides a free budgeting tool you can use to work out how much to spend on your insurance. With that figure in mind, you should strive to get the greatest amount of coverage possible within that budget. 

Underinsuring Your Home

It’s quite common for people to be underinsured, but it is risky. There are a range of reasons this might happen, such as not updating your policy after making home improvements or buying new items or not making an inventory of your belongings (most people own more than they realize).

Here are some steps you can take to get adequate insurance: 

• Keep a detailed list of your belongings, including receipts and pictures where possible. 
• Know your policy limits and insure items as special items when you need to. 
• Understand what your policy covers, and what it doesn’t cover. You might consider buying extra coverage if needed. Common exclusions include home-based business coverage, flood, and earthquake coverage. 
• Review your insurance coverage at least once a year and make changes as necessary. 

Home Insurance From Scotia Insurance

Scotia Insurance offers customizable home insurance to homeowners in Ontario, Quebec, Alberta, British Columbia, and Atlantic Canada. Their policies are designed for peace of mind, so they come with: 

• 24/7 claims service
• Discounts for claim-free and mortgage-free homeowners
• Flexible premium payment options
• Optional contents coverage to cover you during your move.